No Green Signal Yet: RBI, IRDAI Resist Banks’ Entry Into Commodity Derivatives

RBI and IRDAI are not in favour of allowing banks and insurance companies to enter the commodity derivatives market, SEBI Chairman Tuhin Kanta Pandey said.

The stance highlights regulatory caution amid ongoing discussions on market expansion.

Source : PTI

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Key points generated by AI, verified by newsroom

• RBI, IRDAI oppose banks/insurers in commodity derivatives.
• Concerns exist on aligning insurance's long-term with derivatives.
• SEBI discusses unified KYC system (CKYC 2.0) framework.

The Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI) are not in favour of allowing banks and insurance companies to participate in the commodity derivatives market, Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey said on Monday.

Speaking on the sidelines of the IMC Capital Markets Conference at the NSE, Pandey said both regulators have a “valid rationale” behind their stance and are not favourably inclined towards the segment at present.

He noted that insurance, in particular, is a long-term business, and there are concerns about how commodity derivatives would align with such investment horizons.

"SEBI did not receive a positive response from the banking and insurance regulators during its engagements due to certain concerns surrounding the segment," Pandey added.

“Algorithms may move faster than human controls, and digital platforms can become channels for fraud,” he said, adding that next-generation AI tools, while useful for identifying weaknesses, can also exploit vulnerabilities at scale and speed.

On the progress of CKYC 2.0, aimed at enabling a unified KYC system across the financial sector, Pandey said the initiative is currently under development.

The Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI) is leading the effort, with inputs from various regulators.

SEBI recently held discussions with CERSAI to identify key issues that need to be addressed and expressed hope that a framework for CKYC 2.0 could be ready by the end of July.

Meanwhile, last month, speaking at the IMF-World Bank Spring Meetings during an interaction organised by the Confederation of Indian Industry (CII) and the US-India Business Council, Pandey said that India’s capital markets are increasingly being recognised as a stable, resilient and globally competitive destination for long-term investments.

“Indian markets have evolved into a structural pillar of the financial system, backed by strong macroeconomic fundamentals and a steadily expanding investor base,” he said on April 17.

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)